Restore services or face penalties: TRAI to Etisalat, S-Tel

The Telecom Regulatory Authority of India (TRAI) has directed S-Tel and Etisalat DB to restore their services within three days in order to ensure continuity of service to telecom subscribers, even as their telecom licenses are set to get quashed on June 2 as per a Supreme Court directive, reports CNBC-TV18's Malvika Jain.

So, in reality, why does the TRAI want these two companies to remain in business clearly when they don't want to continue their operations in India?

The point that the TRAI has made is that as per the license conditions all the telecom companies have to continue to offer services until and unless their license is cancelled by the licenser, in this case the Government of India. They cannot terminate their services under any circumstances for whatever reasons. In this particular case, there is a Supreme Court directive which says that on June 2 their licenses will get quashed.

According to TRAI, up until now their licenses have not been quashed and it is not the Government of India that has quashed the license. So they should continue to offer services to their customers and there is no reason why they should commit default. They have been given three days to restore services, but the companies on their part have so far made it clear that they are not in a position to continue offering services.

S-Tel has already informed TRAI that its network partners are not cooperating with the company and Etisalat in a statement has told CNBC-TV18 there is no way that it can restore its services. What is interesting here is that while in S-Tel's case, the TRAI took suo moto cognizance of the matter.

In Etisalat's case, in additions to an MNP service provider, it is Unitech Wireless Limited that is Uninor, another company whose licenses which will get quashed and who has filed a complaint.

Uninor which is fighting back does not want the entire ecosystem around it to collapse but these two companies clearly do not want to restore their business, but the TRAI order has been passed under an Act. If they don't comply with this order they might have to face some penalties.

Even as Etisalat moves towards liquidating its Indian operations, the claims by creditors and allegations by Etisalat's Indian partners are growing louder, reports CNBC-TV18's Ashmit Kumar.

In court the hearing was only for a brief period, but there was a lot of noise coming in especially from the creditors. Now in the midst of all that confusion, the Bombay High Court has instructed the creditors to come forward with their claims and has served them with a deadline of April 16.

It has also instructed Etisalat to not give out any payments until there are further instructions from the Bombay High Court.

Standard Chartered is one of the biggest secured lenders. They have exposure to the extent of about Rs 1,500 crore and are taking this matter very seriously. They have also taken up this issue with the Debt Recovery Tribunal (DRT).

Another key creditor to watch out for will be Reliance Infratel. They had moved TDSAT in February 2012 where they claim dues of about Rs 1,200 crore for use of their infrastructure. Importantly, they have sought restraint on Etisalat from disposing off of their assets. This is likely to have implications on the liquidation process as a whole.

Meanwhile, another key set of creditors have been the distributors. The Bombay-based distributors appear to have approached the Bombay High Court. The Delhi-based distributors are also likely to move to the Delhi High Court.

In the midst of all of this, there has to be mounting tension and friction between the two partners. The Indian partners were seen alleging today in the Bombay High Court that the reason that Etisalat wants to exit their business and liquidate their business is so that they can circumvent the non-compete clause of their arrangement and independently exploit the potential of the Indian telecom markets.

There is a lot of noise coming in from different set of stakeholders. All of that is expected to come to head on April 18 which is the date for the next hearing of the winding up petition.